Abstract: Explain the reasons for short put Tencent options and selling US stock Teladoc and share the advantages and disadvantages of this strategy.
Transaction detail
What I want to share with you today is the transaction I made on July 27. The details are as follows:
Short put option
- Tencent Holdings (HK stock code: 700)
- 100 option units
- Expiration: 2021-08-30
- Strike price: HK$430
- The underlying stock price at the time of trading: HK$450
- Option value: HK$15.65
- Commission fee: HK$21
- Total premium collected: HK$1544
Source: http://www.aastocks.com/en/stocks/quote/detailchart.aspx?symbol=00700
Sold stock
- Teladoc Health Inc (US stock code: TDOC)
- Quantity: sold all
- Sold price: US$150.4
Source: https://seekingalpha.com/symbol/TDOC/chart
A quick review of short put option strategy
First of all, if you are not sure what a short put is, you can check my previous article “Basic option strategies – long call, short call, long put and short put”, you can also view the actual operations of the short put that I have done before in “My transaction Record“.
To put it simply, short put is an operation method to look up the underlying stock. When the underlying stock price falls below the strike price at expiration, the premium will be your net profit. But I said in the previous articles that you can’t just think about making a premium when doing short puts. You should always think about the worst-case scenario and be prepared for both directions.
Why did I short put Tencent?
I have currently held a Tencent short put in my hand. It was opened on June 23. If you are interested, you can read that article here. The expiration date is July 29, i.e. two days later, and the strike price is HK$560. I am ready that the option will be executed to buy Tencent shares.
By the way, today I saw Tencent’s sharp drop again. It was around HK$450. It has already fallen by 20% of the strike price of the Tencent short put in my hand. I think the price is really attractive, so I decided to open short put again for the lower price to buy more of Tencent stock. Based on my strike price of HK$430 and option premium received, if the option will finally be executed, the cost price will HK$414.35 per share, and the return rate of premium received is about 3.64%. The cost price at this price will be 8% lower than the current price and 26% lower than the strike price of HK$560 to be exercised in two days. We will see if this “buy order” will be executed again at the end of next month.
Reasons for selling TDOC
The reason for selling Teladoc today is very simple. It is not a bearish on TDOC, but I just want to adjust the position. Selling Teladoc to allocate funds to buy recent plunged Chinese stocks, including Tencent and Xiaomi, which are expected to be bought more by exercising the short puts in my hand at the end of this month. The strike price of them are HK$560 and HK$26 respectively. Regarding the short put transaction of Xiaomi stock, you can read this article if you are interested.
In fact, the logic is very simple. I think in the long run, by comparing Tencent with Teladoc, Tencent will have better growth in the long run. Therefore, since we opened another short put option of Tencent again today, we must first prepare for funds. Fortunately, the recent performance of US stocks is much better than that of Chinese stocks, so I decided to liquidate Teladoc first, lock up certain funds, and prepare for the increase in Tencent.
Comments and sharing
If you have any questions, please feel free to leave a message or comment below, I will reply you. Or if you find anything incorrect in the article, please let me know and learn from you. If you find it interesting or it may help you in any sense, please share with other people.
